BitTax – Is it a thing?

No one likes paying taxes! That’s a fact, I know of no one who likes to give a portion of their hard earned cash to the government each month (because we can always trust our government).

“Nothing is certain but death and taxes”

Yes, unfortunately the old saying is true, and although we don’t like paying taxes, we agree that it must be done in order to fund things like: Schools, roads, public transports, healthcare (NHS rocks!!!!). All of this wouldn’t be possible without taxes, because where would the money come from?

We enjoy the benefits of it don’t we? Or would you rather your rubbish just pile up outside your homes and end up becoming a cesspit……….I didn’t think so!

They will find a way!

Since the emergence of Bitcoin in 2009, its market cap has risen from approximately $7.16 billion to a whopping $100 billion today! As the price of Bitcoin has risen over the years, so to has the confidence of investors. More and more business are accepting Bitcoin has a method of legitimate payment.

Companies such as: Overstock.com which in 2014 partnered with the Bitcoin exchange Coinbase. Not long after the decision to accept Bitcoin as a method of payment, the company released a statement saying that it would hold 5 – 10% of its paid Bitcoin as reserves (I can only imagine how much the reserves a worth now). The Telegraph had this to say.

The popularity behind Bitcoin is pushing more and more companies to listen to their customer base and accept Bitcoin has a legitimate method of payment for goods and services.

But from a federal income tax point of view, cryptocurrency isn’t considered as currency. Moreover, the IRS issued notice 2014-21, and for the first time, set the position for IRS to tax virtual currency.

“If they can find a way to tax you, you’d better damn well believe that they’ll find a way”

According to a notice from the IRS;

“Virtual currency is treated as property of for U.S. tax purposes”

Uncle sam just loves his taxes doesn’t he. The notice also stated that “General tax principles that apply to property transactions apply to transactions using virtual currency”

Basically, the IRS is treating the income, or capital gains from the sale of cryptocurrency as a capital asset. Israel was said to be even more harsh on offenders.

The treatment of cryptocurrencies from the IRS has created an encouraging tax option for retirement account investors. You see, when a retirement account generates an income from the sale of a capital asset, the retirement account doesn’t actually pay tax on the transaction. This loophole is seen as a profitable way to defer or even eliminate the need to pay tax on the initial investment.

Conclusion

Cryptocurrency investments can be risky and extremely volatile. Any individual who is interested in investing in cryptocurrencies like Bitcoin, should do their research beforehand and try to understand what gives them value. Do your due diligence and take your time when trying to understand cryptocurrencies, there are a lot of people out there who would love to take advantage of your naivety. Find out more about mining crypto here.